Mil­len­ni­als Drive Mort­gage Orig­i­na­tion Rises In 2020 and Be­yond: MBA

National Mortgage News - - Origination - By Brad Finkel­stein

While mort­gage vol­ume is ex­pected to shrink next year, it should in­crease dur­ing the fol­low­ing two years and be­yond as mil­len­ni­als start buy­ing homes, the Mort­gage Bankers As­so­ci­a­tion fore­casts.

Orig­i­na­tions should fin­ish this year at $1.636 tril­lion and de­cline in 2019 to $1.63 tril­lion, the or­ga­ni­za­tion an­nounced at its an­nual con­ven­tion in Wash­ing­ton.

That is a change from Septem­ber’s out­look of $1.606 tril­lion in to­tal pro­duc­tion this year and $1.592 tril­lion for next year.

“The un­em­ploy­ment rate is at its low­est level in al­most 50 years, re­sult­ing in faster wage growth and more con­fi­dent home­buy­ers,” Chief Econ­o­mist Mike Fratan­toni said in a press re­lease.

“While the Fed­eral Re­serve is ex­pected to in­crease short-term rates fur­ther, 30-year mort­gage rates should rise only mod­estly from here. We are see­ing some de­cel­er­a­tion in the rate of home price growth, but be­lieve this is a healthy pause for the mar­ket, as it will al­low in­come growth to catch up to the re­cent run-up in home values.”

Home pur­chase orig­i­na­tions are ex­pected to in­crease in each of the next few years, go­ing from $1.143 tril­lion in 2017 up to $1.308 tril­lion for 2021. This in­crease is ex­pected even as new-home con­struc­tion re­mains con­strained go­ing for­ward, Fratan­toni said.

Re­fi­nanc­ings made up 35% of the re­vised $1.76 tril­lion orig­i­nated last year. They are ex­pected to fall to 28% this year and 24% in each of the next two years, be­fore slightly ris­ing to 25% in 2021.

There was an in­crease in the 2020 pro­jec­tion to $1.683 tril­lion from Septem­ber’s $1.631 tril­lion. The ini­tial pro­jec­tion for 2021 is for $1.74 tril­lion. The 10-year Trea­sury yield should fin­ish this year at 3.2% and rise to 3.4% by the sec­ond quar­ter next year, where it will re­main through­out 2020. This should bring the 30-year fixed rate to 5.1%, Fratan­toni said.

But those ris­ing rates are af­fect­ing con­sumers’ hous­ing mar­ket out­look.

“While the macroe­co­nomic and hous­ing mar­ket back­drops are, and should re­main quite fa­vor­able, the mort­gage in­dus­try con­tin­ues to be chal­lenged by the drop in orig­i­na­tion vol­ume, cou­pled with sig­nif­i­cant mar­gin com­pres­sion,” said Fratan­toni. “Lenders of all types and sizes are see­ing el­e­vated costs, cou­pled with in­tensely com­pet­i­tive pric­ing, to cap­ture more vol­ume. This in turn is de­press­ing rev­enues.”

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